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Thursday, October 18, 2012

DOD Teams Up With Financial Bureau to Address Student Loan Problems

By Jim GaramoneAmerican Forces Press Service

WASHINGTON, Oct. 18, 2012 – The Defense Department will work with
the Consumer Financial Protection Bureau to ensure the financial health
of service members and their families, Defense Secretary Leon E.
Panetta said here today.

Panetta and Holly Petraeus, the bureau’s assistant director for
service members’ concerns, spoke specifically about the financial burden
of student loans.

“The number one reason people in the service
lose their security clearance is because of financial problems,” Panetta
said. “And that’s something that we absolutely now have to address.”

Petraeus presented the results of a report on the challenges that
service members face in repaying student loans. This is a problem,
Panetta said, noting that some 41 percent of service members are paying
off an education-related loan.

“I’m concerned that the report
that is being issued today warns of student loan companies that not only
may confuse service members, but even violate the law in the approach
that they take,” he said.

Petraeus said she repeatedly hears of
the burden of education loans whenever she visits troops. “Service
members are entering the military with student loan debt, and as a
result facing both financial challenges and paperwork challenges,” she
said.

In one case, a sailor told her of entering the Navy
carrying $100,000 in student loan debts. “He joined the Navy because it
was the only way he believed he could make it, but most of his Navy
paycheck was going towards paying off those loans,” she said.

Petraeus said this is not an isolated case, and she is concerned that
service members are not getting the information they need about programs
and policies that could help them reduce that debt significantly while
they are on active duty.

“This is an opportunity for us to fix an
issue that is impacting the financial readiness of the force and
causing harm to military consumers,” she said. “We need to be proactive
in addressing problems in the servicing of student loans for members of
our military.”

The student loan problem may be in the same
category as home loans. In past years, the bureau found that mortgage
lenders consistently failed to give troops the protections they earned
under the Service Members Civil Relief Act.

“There are real
concerns of a similar problem with student loan servicing and SCRA
violations,” Petraeus said. “In fact, I think the problem may be greater
with student loans than it was with mortgages because I believe many
more young service members enter active duty with student loans than
with a mortgage.

Service members are having problems invoking
consumer protection rights under the legislation. They do not know about
repayment alternatives, and student loan servicers “are providing them
with inaccurate or incomplete information about their options,” she
said. “And they are confused by eligibility requirements for benefits
that are so complicated that they either can’t figure out what they are
entitled to or don’t realize that taking one benefit might exclude them
from being eligible for another, more helpful one.”

And this is
real money. Petraeus said the young sailor carrying the $100,000 debt
burden could pay nearly $25,000 extra if he doesn’t receive the
active-duty interest rate cap. “And if he stays in the Navy for 10 years
but doesn't know about or doesn't use the income-based repayment plan,
the Public Service Loan Forgiveness Program and the SCRA rate cap, he
could lose out on nearly $76,000 that he could have cut off his debt in
those 10 years,” she said.

The bureau will be teaming up with DOD
to train judge advocate general personnel, personal financial managers
and education service officers so that they know about these benefits
and consumer protection, she said. “We also plan to push out the message
through a variety of media to all service members,” Petraeus said. “We
want them to know that even if they did not know about or ask for
student loan repayment benefits when they entered the military, it’s not
too late to do it now.”